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Honduras is building a charter city? This is never going to work

December 21, 2011

A couple of years ago, I wrote a pretty critical post on Paul Romer’s proposal for ‘charter cities’. According to last week’s Economist, Honduras is now about to try and turn that blueprint into reality. I’m prepared to make a small bet it won’t work – any takers?

Romer proposes building cities from scratch in the world’s poorest nations, outsourcing their design and government to rich countries. Like their kindred proposal, Paul Collier’s ‘independent service authorities’, the underlying motive seems to be to liberate development from the supposedly dead hand of dysfunctional and corrupt states, transferring it instead into the hands of benign and honest technocrats. There’s probably some folk memory of the Pilgrim Fathers (below) at work somewhere. Here’s an excerpt from the Economist piece:

“The Honduran government wants to create what amounts to internal start-ups—quasi-independent city-states that begin with a clean slate and are then overseen by outside experts. They will have their own government, write their own laws, manage their own currency and, eventually, hold their own elections. This year the Honduran legislature has taken the first big steps towards the creation of what it called “special development regions”. It has passed a constitutional amendment making them possible and approved a “constitutional statute” that creates their autonomous legal framework. And on December 6th Porfirio Lobo, the Honduran president, appointed the first members of the “transparency commission”, the body that will oversee the new entities’ integrity.

The idea of setting up a charter city echoes the way that big companies adapt to change. They often set up new divisions unencumbered by old rules. These can be dramatic successes. Target, America’s second-largest discount retailer, began life as an internal start-up but eventually took over its parent company, Dayton Hudson.

Perhaps the most important feature of the new venture is the “transparency commission”, a kind of board of trustees that appoints the governors, supervises their actions and is meant to make sure that the entities are beyond reproach, not least when it comes to the corruption (often fuelled by the drugs trade) that plagues the region. “It is easier to create a board of trustees than to give control of part of your territory to a foreign nation,” says Octavio Sánchez Barrientos, the presidential chief of staff. A role for foreign government is still an option, but only Mauritius has so far signed on—as part of its push to become a global provider of legal services.

Much will depend on the transparency commission. The first batch of members appointed this week comprises George Akerlof, another economist and Nobel laureate; Nancy Birdsall, formerly at the Inter-American Development Bank, who now runs the Centre for Global Development, a think-tank; Ong Boon Hwee, a former senior executive at Temasek Holdings and Singapore Power; and Harry Strachan, an investor who used to run INCAE, a leading Latin American business school, with Mr Romer himself in the chair.

The commission’s first job is to fill all of its nine seats. Then the hard work will start, first on investigating whether any foul play has already taken place: rumours are circulating that insiders have bought land in or near Trujillo and other potential sites. Next comes helping pick the regions’ locations and choosing developers in a way that inspires confidence not suspicion. The Honduran agency for public-private partnerships has already signed several memoranda of understanding with firms including South Korea’s Posco and two start-ups with libertarian leanings.

Last, but not least, comes security. Private security firms will have to protect the population in the new cities. Honduras is one of the world’s more corrupt countries, in 129th place out of 183 in a survey of outsiders’ perceptions by Transparency International, a Berlin-based lobby group. It also has the region’s highest murder rate. The local police have a poor reputation. Last month 176 police officers were arrested in a corruption crackdown.”

On the basis of the Economist piece, at least, the Trujillo charter city looks like a mess. The government is going to bypass constitution, laws etc, outsource the lot to private interests and rely for good governance on a commission of overstretched VIPs. If the hyperactive Birdsall is typical, they will have so many other commitments that they really are not going to be able to invest the time to micromanage a potentially chaotic period of institution-building. I emailed Nancy about this and she replied that yes, there are big risks, but the world needs more experiments like this not least because ‘we don’t know in the development community how to ‘produce’ good governance’. She points out that there are resources, e.g. to pay at least one aide per member of the transparency board. But that still seems like a pretty skeletal arrangement and many of the criticisms I quoted in my original post apply in this case too. Got a bad feeling about this one.

15 comments

“His aim was the creation of self sufficient towns,really very nice towns if you were docile and had no plans of your own and did not mind spending your life with others with no plans of their own. As in all Utopias, the right to have plans of any significance belonged only to the planner in charge.”

Sounds sinister to me too, especially the concepts of “entities beyond reproach” and “starting from a clean slate”….

By coincidence I had cause recently to excavate an Oxfam book from 1991 called “Brazil: a mask called progress”, by Neil MacDonald and came across the following passage about the town of Tucurui, which indicates the charter city concept isn’t entirely new in Latin America:

“The edge of Tucurui’s world is formed by a 20-mile fence, enclosing the dam and the new city that has grown up beside it. It makes all the difference in the world which side of the fence you live on. Tucurui new town does not invite visitors. Its orbital road spirals for miles round the outside of the fence. You can see the clean, neat houses. But there’s no way in. Finally you come to the security gate on the far side, guarded by armed police. This is the sole entrance to the city. Here are shopping-malls, air-conditioning, movie theatres for the employees and functionaries of the dam. Outside are the mean shacks of the settlers and the now-neglected old town. These are the people the fence is meant to keep out”.

If the developers of a charter city don’t produce high-quality public goods, they’ll fail to attract paying residents and lose billions of dollars. This means that charter cities will be the one place on earth where good governance is upheld, not by democratic institutions, which are very often corrupt and sclerotic, but by the tested strength of the invisible hand.

In several decades, the majority of the world’s population will live and work within a competitive marketplace of charter cities, where trillions of dollars and the best creative minds in the world will be constantly employed in the quest to earn entrepeneurial profits by producing marginally better public goods. Migrants will leave penurious villages and dangerous slums and quite literally walk through the multicolored gates of Google City, where robots scrub the streets and social life is organized in awesome ways that we can’t even imagine.

We’re on the brink of the greatest political revolution in human history. Please don’t stand on the sidelines.

Duncan: impressive confidence, care to make a small bet on that allan?

I liked the charter city idea from the start, when I first heard Paul Romer explain it during a visit to CGD. Others, some of whom I would normally agree with on most topics, find the idea “sinister.” Why? I think the difference has to do with the five years I spent living in Hong Kong (one of the world’s most successful charter cities) and the two years I spent in Manila (a largely disfunctional city in a disfunctional democracy). Anybody who has spent time in both places will be quick to understand that social norms matter hugely, and that it’s nearly impossible to change the rules of the game once it is under way. Hong Kong thrived under the British (a prosperity that has continued under Chinese rule) not because it was a democracy (it wasn’t and isn’t) but because it established and maintained predictable rules that encouraged enterprise and punished corruption and other crimes. Can a similar situation be created now that the era of Gun Boat Diplomacy has passed? The people and legislature of Honduras, faced with illicit drug corruption, chronic high unemployment, and rampant crime, should be praised for attempting such a bold solution. (To hear my Wonkcast interview about charter cities with Paul Romer, go here: http://blogs.cgdev.org/global_prosperity_wonkcast/2010/04/26/paul-romer%E2%80%99s-bold-new-idea-for-charter-cities/

In ‘charter cities’ there are 2 ideas mixed up, and I think we should better delink them.
1: Cities can manage their own governance. Bouyant cities with a lot of independence can be a powerful motor for economic growth. The city state is militarily vulnerable, but socially and economically vibrant.
2. External experts know best. History is nothing but a burden that can be ignored.

It appears that the current trustees do not appear to include anyone with experience of attempts to build and run new towns or cities, or they might not have chosen to become involved. Almost all experiences of founding new cities, especially in developing countries, have not turned out as anticipated by the technocrats (planners, civil servants, financiers) who draw up the blueprints – their populations grow less or more rapidly than anticipated, they often fail to attract the anticipated economic activities, the provision of facilities and development of social organisations lags behind physical and demographic growth, and they rarely provide adequately for low income residents and informal sector activities (often leading to the emergence of a ring of unplanned settlements outside their boundaries) – see, for example, Abuja, Brasilia, Chandigarh, Islamabad, the new towns outside Cairo….. Maybe it will be possible to develop a good quality, tidy physical environment in such a new city, but under autocratic governance arrangements. The occasional new city is no alternative to recognising the strengths and tackling the problems faced by existing complex, diverse, unequal but socially and culturally vibrant cities.

1 • Prior and Informed Consent: Do the Honduran people know what they’re getting into? I doubt it, because I think the promoters have little idea of what they’re getting into.

2 • Sophisticated Investor: High risk investments are for sophisticated investors who understand the risks, and can afford the losses. Typically, people in poverty are not sophisticated investors.

3 • Rationality: Though mathematical gambling suggests that to win or lose on a 50/50 bet is the same, real people act “irrationally”, by preferring to avoid losses. But the mathematics of gambling was designed by mathematicians, whereas human biases are the product of evolution. Double your crop, you just have bunch of rotting extra food; lose your crop and your dead. In real life, the “irrational” risk-averse response is much smarter.

Why do Westerners always think that if they have an untested idea, the place to try it out is on some poor people. Why don’t they try it out in the Hamptons? (I’m sure we could figure out a suitable version.)

Where are the ethics of experimenting on the poor? Didn’t we just apologise for using them for medical research in the 1950s? Are we going to learn some day?

At minimum, we should demand that all the proponents, researchers, consultants and financial backers put their own life savings on the same bet. If the charter city doesn’t work, they give up all their assets, which are transfered to the Honduran people as compensation; if the charter city works, they get double their money for all the great work they’ve done.

I am a bit late on this post, but it is too interesting to resist! Like Duncan I largely stand by my comments included in his earlier post, though it seems that this version of the charter city concept has loosened up on migration and I’m not sure if this makes it better or worse. Carole Rakodi is spot on regarding the apparent lack of thought given to the historical experience of cities and urbanization (other than the celebrated Hong Kong – a success story which, let’s not forget, involved over 150 years of colonialism, while the charter city concept claims that by allowing people to opt in or out it is thoroughly un-colonial. I am not sure you can have your colonial cake and eat it). Here are a few more potential problems:

– The possibility (or rather, likelihood) that huge slums outside the borders evolve to house those who build and service the charter city but for whom it is much cheaper and easier to live by the freewheeling rules of Honduras than the tight regulations of the city. The comparison with people who willingly migrate to e.g. the UK to work is all very well, but if people could work in the UK while paying the rent they would have paid in e.g. Bangladesh then I’m sure many would. So the likelihood is that many charter city workers would still live conveniently over the border. Who provides infrastructure, housing and services to these people and deals with the social dislocation this setup creates? Or you do you somehow force them to live inside the city and end up with a Dubai-style labour underclass inside the borders?

– The idea that the city will begin by only including people who share a certain set of norms is patently absurd. Will there be a ‘norm exam’ of some kind to facilitate entry? Then, apparently, ‘subsequent immigrants will adapt’ to these norms. Formal rules can be introduced at the stroke of a pen; norms take generations to change and that change rarely comes as a consequence of a pen-stroke in itself. Certainly, people can adapt to ‘talking the talk’ of new rules pretty fast – but is that not the whole sorry history of attempts to impose democracy and ‘good governance’ on developing countries from the outside in recent decades? There is a serious question mark regarding what kind of norms are actually likely to emerge in this context. Building an enclave of ‘good rules’ in the middle of Honduras is not the same as e.g. arriving in a sparsely populated continent, exterminating much of the indigenous population and then importing both western laws and western people, as happened in the US or Australia.

– Setting up a low-tax enclave in the middle of a deeply corrupt state…possibly not a great idea. The implication is that by putting clever Western people in charge of the rules one can outfox experts in corruption who are deeply intimate with the Honduran context and may seek to play their activities inside the charter city alongside those outside it in ways that maximise their interests. There is little reason to believe this outfoxing will be successful. Moreover, taxation has historically been one of the major means of creating accountability and entrenching the very norms of rights and responsibilities that the charter city would presumably be supposed to inculcate over time. Minimise taxation and you undercut these important processes.

Why do not they try this in th US? Maybe because they are not so gullable to be lulled up the economic gods.

LET THE HUNGER GAMED BEGIN. The children of this world are wiser than the children of light. I compare the Hondurans people, of which I am one, to the children of Light. People often see truth in different lights. I have a totally different point of view concerning this matter. Let me start with the parable of the crops thief.

There was a certain thief that went to his neighbor crops to steal corn from his neighbor with his son and before doing so, he looked fearfully all around to see if there was not anyone around to see him stealing; and he charged the son to warn him if he detected someone coming. And the son immediately complied by telling his father that he forgot to look up. The son knew that God is watching. And this is a God given point of view.

Has any of you considered where the name Honduras comes from or what it may truly means? It means the Bottomless Pit. It also means the house of SabiDURiA or th home of WISDOM. It is my home. Anciently it was the home or regions University of wisdom or where the people did partake a lot of the forbidden fruit of endless knowledge of good and evil. Unfortunately, they rigged too much evil and as a result they were utterly destroyed. Only the ruins of my ancestors remain.

1. Having said that. To me this Charter City initiative in Honduras is no different than the enslaving city of Babel in the ancient world order when Nimro-d the mighty hunter and his institures of debauchery; and in this Case, Charter City, Romer-d, the mighty economist, and his institutes of Monopoly, for then as it is now, they said to one another;

And they said one to another, Go to, let us make brick, and burn them throughly. And they had brick for stone, and slime had they for morter.

And they said, Go to, let us build us a city and a tower, whose top may reach unto heaven; and let us make us a name, lest we be scattered abroad upon the face of the whole earth.

(Old Testament | Genesis 11:3 – 4)

HonDURAs as it now stands is or was after all, a Province of Ancient Babel and later on a province of latter day Babylon; which was and is located in the plain of Shinar; where a great golden image was created that looked like a pyramids that measured six by sixty cubits. Please refer to the entire chapter 3of the book of Daniel in the Bible as a textual reference. Ironically, for those that have eyes to see, the coat of Arms of Honduras, is as that great triangular image that sits upon the great waters that represent a great horn with an eye, which is the very synagogue of Satan. IF that city is built in HONDURAS, not many days hence we will se a great beast ascend from the Bottomless pit like Nebuchadnezzar.

“NEBUCHADNEZZAR the king made an image of gold, whose height was threescore cubits, and the breadth thereof six cubits: he set it up in the plain of Dura, in the province of Babylon.”

(Old Testament | Daniel 3:1)

It may last for a short period, but we all know the end of the story of both Babel and Babylon and what became of the great tower. Let the huger games begin.

2. Charter cities could very well be the way of the future. But only if based upon sound governing principles; and not only upon laws, a judiciary system and constitutional safeguards and policies that work and benefits or protect the Economic interests of those who will invest in these enterprises. Most of those who promote these mammoth enterprises; have exhausted the resources of other lands and countries; and are running away from sound governing laws as ravenous wolves seeking whom to devour; and it is because they are likely criminals.

3. What about the human factor, MR NIMROD? In these schemes there is not real plan for self governing human being but for potential slaves. What does an economist know beyond numbers and runaway expansion? Quantity not necessarily translates to quality and the pursuit of happiness. It is not only about better living conditions. Many people migrate to the US for the freedom and Liberty factor it represents and engenders. If immigrants knew that there is a better chance to work in Spain, or China, Singapore and Hong Kong to improve themselves, and there very well is on most of them, they still would not migrate there. Many would rather die trying to pursue their happiness by coming to the US even illegally. And it is because, there is no true and lasting happiness anywhere without property ownership rights, whether tangible or intangible; without moral agency, without law; without freedom to voice ones mind and thoughts.

4. All idolized cities decay or are destroyed sooner rather than later; and the result is almost always meager living conditions and destruction because they prescribe debauchery as ancient nimrod did with his institutes of immorality, idolatry and debauchery which governed and commercialized even the intimacy of human beings and which regarded not the sanctity of life. They even worshiped the god of nature or animals and sacrificed to them their babies. All in contrast to what God had commended their fathers.

5. Again, the concentrations of population anywhere save it is for defense and other necessary central activities is never recommended unless the city builder and its foundation is GOD. This Charter initiative in fact goes against the grand command that God grace to our fathers which say, be fruitful and multiply and replenish the earth. NO wonder then why Babel was confounded, divided and destroyed. Only now, after several thousand years they have begun to be one language and purpose again.

6. There needs to be a moral fiber in any civil society to promote and maintain collectivism. And because they have lost this fiber and cannot find peace, misery seeks the company of misery and want to build themselves up. Are Honduras so ungovernable that they need a Daddy State within its borders to show them the true way? In fact, the way has been shown fro over two hundred and thirty years by the merits of an inspired constitution a that of the United States of America, the REPUBLIC, and if so, why they do not develop it themselves?

7. When I left Honduras my dream was no different than that of its founder fathers, which is and continues to make of Central America as one single Nation or a federation of Central American Republics that will make a Rich, strong and respected country. The best way to improve any society starts at home, by teaching its members good and self governing principles so that they are able to govern themselves. And charity never fails. Invest in Education and Charity and you will have changed the entire country of Honduras instead of gathering renegades from all countries to enslave them in a City State Prison.

1. RED WILL FAIL because it is not built by God and it not based upon pure principles of Charity. This is the LAND of ZION and we, its people at large are not ready for it. And if they build it instead of blessing they will receive cursing. Because it requires the laws of GOD to be self sustaining and to successfully operate in righteousness. And I know it will also fail because they are planning to build it for people to work merely for Money or self improvement and not for true collectivism which is for equality where there will be o rich because there are no poor. And God has forbidden this thing, especially upon these lands of Continental America. And he sad said that the Laborers of Zion will work for Zion, because if they work for money, they will perish. If this people are not progressing as they should even now or since they have been a people, it is only because they have forsaken their God and his holy Commandments they have rejected. Here is the law and the testimony says:

“Behold, the Lord hath forbidden this thing; wherefore, the Lord God hath given a commandment that all men should have charity, which charity is love. And except they should have charity they were nothing. Wherefore, if they should have charity they would not suffer the laborer in Zion to perish. But the laborer in Zion shall labor for Zion; for if they labor for money they shall perish.”

(Book of Mormon | 2 Nephi 26:30 – 31)

2. There is only one of these City enterprises that has truly succeeded. And it was the City of Enoch or Zion which was built some five thousand years ago or so. And it took about 365 years for them to reach perfection. In fact it was so perfect hat God blessed it took it to heaven with its land, crops, herds and houses, while the rest of the World He cursed and was drowned by the flood in which only eight children of GOD or humanoid souls survived. The City of Enoch or Zion fled to haven and it may have very well been located in the world’ sonly Chasm, which is located next door in the Gulf of Mexico. Perhaps that is or was the so called Atlantis that everybody talks about in mythology. The world does not know whether it drowned or was lifted up. All it is know is that it was lost or it fled. Here is the law and the testimony:

“The fear of the Lord was upon all nations, so great was the glory of the Lord, which was upon his people. And the Lord blessed the land, and they were blessed upon the mountains, and upon the high places, and did flourish. And the Lord called his people ZION, because they were of one heart and one mind, and dwelt in righteousness; and there was no poor among them. And Enoch continued his preaching in righteousness unto the people of God. And it came to pass in his days, that he built a city that was called the City of Holiness, even ZION. And it came to pass that Enoch talked with the Lord; and he said unto the Lord: Surely Zion shall dwell in safety forever. But the Lord said unto Enoch: Zion have I blessed, but the residue of the people have I cursed.”

(Pearl of Great Price | Moses 7:17 – 20)

And after that Zion was taken up into heaven, Enoch beheld, and lo, all the nations of the earth were before him;

(Pearl of Great Price | Moses 7:23)

And all the days of Zion, in the days of Enoch, were three hundred and sixty–five years. And Enoch and all his people walked with God, and he dwelt in the midst of Zion; and it came to pass that Zion was not, for God received it up into his own bosom; and from thence went forth the saying, ZION IS FLED.

(Pearl of Great Price | Moses 7:68 – 69)

3. But this is not all, there will be a time, that we will build a city of Zion, her in America, a holy city which will be called the New Jerusalem. And it will be build in Independence, Missouri. And the name of the city will be called the New Jerusalem after which there is a type. And they will be terrible unto all nations. Of which it is written:

“For it shall come to pass, saith the Father, that at that day whosoever will not repent and come unto my Beloved Son, them will I cut off from among my people, O house of Israel; And I will execute vengeance and fury upon them, even as upon the heathen, such as they have not heard. But if they will repent and hearken unto my words, and harden not their hearts, I will establish my church among them, and they shall come in unto the covenant and be numbered among this the remnant of Jacob, unto whom I have given this land for their inheritance; And they shall assist my people, the remnant of Jacob, and also as many of the house of Israel as shall come, that they may build a city, which shall be called the New Jerusalem. And then shall they assist my people that they may be gathered in, who are scattered upon all the face of the land, in unto the New Jerusalem. And then shall the power of heaven come down among them; and I also will be in the midst.”

(Book of Mormon | 3 Nephi 21:20 – 25)

And that a New Jerusalem should be built up upon this land, unto the remnant of the seed of Joseph, for which things there has been a type. For as Joseph brought his father down into the land of Egypt, even so he died there; wherefore, the Lord brought a remnant of the seed of Joseph out of the land of Jerusalem, that he might be merciful unto the seed of Joseph that they should perish not, even as he was merciful unto the father of Joseph that he should perish not. Wherefore, the remnant of the house of Joseph shall be built upon this land; and it shall be a land of their inheritance; and they shall build up a holy city unto the Lord, like unto the Jerusalem of old; and they shall no more be confounded, until the end come when the earth shall pass away. And there shall be a new heaven and a new earth; and they shall be like unto the old save the old have passed away, and all things have become new. And then cometh the New Jerusalem; and blessed are they who dwell therein, for it is they whose garments are white through the blood of the Lamb; and they are they who are numbered among the remnant of the seed of Joseph, who were of the house of Israel.

But Nimrod the mighty hunter knew this and he hated God and all that rightesouness Represents. And this is why he erected Babel to Mock God and oposse him in all things for God said, be fruit ful and replesnish the earht. Instead Nimrod gathered them and concentrated populations. God said whorshio God only and Nimrod elevated animales above man and mande great molock shallow images where thay sacrificed virgins and children. And he also made insittutes of debauchery where the indulgence of all sorts of immorality was practiced as in the grobes of Pleasure and the gardens of delights. They erected massive male and female sexual images as monuments and they had all sorts of sex parties around them to pollute and corrupt themselves. And their purpose was to build such a high tower to place a city on top thereof that in case God was provoked and send the floods again they would be able to survive. They were with one language and one purpose and nothing was going to change their mind. So the LORD allowed them to burn brick and bitumen and they started it. IT is sais that it took for people about a year to take move one brick from the bottom to the top. And that they were so resolute that when a man died, nothing happenned but when a brick fell and was lost the whole people mourned. The circunference thereof was abotu two miles but God confounded them and destroyed their enterprise. There was a great fire and burned a third of it. The other third went under because of an earthquake and the the other third remained. It was such a plateou that peoplr begun to take it appart and build homes with it. You may read this imore comprehensible n a book called the third thousand years, y Cleon Skousen or in the scriots of JOSEPHUS.

If this is what this people want, let them GO TO AND BUILD THEIR CITY AND WE WILL SEE WHAT HAPPENS TO THEM. And what will happen to those IDolized cities of this day.

Here is an excerpt.

Woe unto them that join house to house, that lay field to field, till there be no place, that they may be placed alone in the midst of the earth!
9 In mine ears said the LORD of hosts, Of a truth many houses shall be desolate, even great and fair, without inhabitant.
10 Yea, ten acres of vineyard shall yield one bath, and the seed of an homer shall yield an ephah.
11 ¶ Woe unto them that rise up early in the morning, that they may follow strong drink; that continue until night, till wine inflame them!
12 And the harp, and the viol, the tabret, and pipe, and wine, are in their feasts: but they regard not the work of the LORD, neither consider the operation of his hands.
13 ¶ Therefore my people are gone into captivity, because they have no knowledge: and their honourable men are famished, and their multitude dried up with thirst.
14 Therefore hell hath enlarged herself, and opened her mouth without measure: and their glory, and their multitude, and their pomp, and he that rejoiceth, shall descend into it.
15 And the mean man shall be brought down, and the mighty man shall be humbled, and the eyes of the lofty shall be humbled:
16 But the LORD of hosts shall be exalted in judgment, and God that is holy shall be sanctified in righteousness.
17 Then shall the lambs feed after their manner, and the waste places of the fat ones shall strangers eat.

This is a conversational blog written and maintained by Duncan Green, strategic adviser for Oxfam GB and author of ‘From Poverty to Power’. This personal reflection is not intended as a comprehensive statement of Oxfam's agreed policies.